“Every policy setting process stregthens and unifies the family and increases the likelihood of long term business and damily success, survival and prosperity.” – JS Strachan
Running a family business with siblings and other relatives could be rewarding but at the same time, could be a source of conflict which may cause the downfall of the company itself. Sibling rivalries and feuds among family members who are directly or indirectly connected to the business are likely to occur. The larger a business-owning family becomes, the more complex and diverse it gets. Thus, developing the skills required to forge a common agenda and resolve differences among family shareholders involves great challenges.
Managing complexity requires introducing ‘structure’ in the form of rules, policies and procedures that help the family develop a cohesive approach to its involvement in the business. In short, what’s needed is effective governance, which means creating organized accountability and alignment among the different interests of the owners, the family and the business.
Sibling partnership
The evolution in second generation family firms is from a single, all-powerful owner to a partnership of brothers and sisters in which power and authority must now be shared. There may be additional owners – sometimes from the parent’s generation, sometimes among the siblings’ children – but ultimate ownership authority and influence will rest with the siblings. Developing processes for sharing power and control among siblings and avoiding sibling rivalry are important challenges for family firms at this stage of development.
Many family companies find it useful to introduce special governance systems and mechanisms in order to manage the diversity of interests and demands, and to let everyone have their say in a controlled environment. In building a common and workable vision together, it is often useful at this point to allow those family members who do not subscribe to that vision to exit as shareholders. There are no ‘one size fits all’ solutions here.
The third party guide
Acquiring third party consultants like an advisory board for the family business owner, business coaches and psychologists who specialize in guiding family businesses resolve sibling rivalries and other family matters create structures in the family business. Their unbiased opinions would lessen or even eliminate the sibling rivalry if done with the families’ willingness to cooperate through a well-defined process.
Other family businesses opt for consulting companies that provide expert services by giving sound counselling on how to run the family business in the midst of conflict like sibling rivalries and other related issues. Such consulting companies help in developing applicable succession and compensation plans that prevent sibling rivalries and strengthen family run businesses through seminars, programs and private consultations.
The consultant is similar to the ‘guru’ in India who works to foster harmony within the family. Chosen for his wisdom and shrewdness, families take the views of their gurus (who are not formally connected with the business) seriously, and vest them with significant respect, prestige and authority.
Qualified non-family allies and workforce
Creating an advisory board and hiring people who are non-family members to handle authoritative (supervisory and management) positions is one way some family run businesses survive despite sibling rivalries. The siblings, the business owner and other family members can express their opinions, feelings, and needs to the advisory board and receive sound advice. Seeking guidance from an advisory board and hiring qualified non-family workforce would deter any aggravation arising from over familiarity and jealousy among siblings. It is important to make sure that the advisors and hired personnel hold relevant professional experience and excellent technical skills and knowledge to gain respect from the rival siblings and the whole family business team.
Disagreements may arise
Some family members especially the rival siblings may tend to be stubborn and refuse accepting the advice of the board. Disagreements from the siblings are expected, but in order to keep sibling rivalries from happening, the family business has to establish structures through the presence of an advisory board (to help the business owner handle the pressing conflicts within the family and the business); and non-family workforce who have no personal bias against the siblings and other relatives. The proper introduction of this action in a formal meeting will provide a venue for healthy communication and the announcement of a firm mandate among the siblings and all of the family business team to cooperate professionally.
‘Golden Rules’ for setting up a governance process
The following principles and ideas should guide the establishment of a family governance process:
– Fairness
– Inclusiveness
– Flexibility
– Transparency
– Education
– Accountability
– Collective buy-in
– Clarity of procedures.
Many families who have been through the experience stress the importance of having a ‘driver’ in the governance process — somebody trusted from within the family who leads the process, and motivates and involves family members, especially the siblings, in support of the plan.
